Correlation Between Petroleo Brasileiro and HSBC MSCI

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and HSBC MSCI at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Petroleo Brasileiro and HSBC MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petroleo Brasileiro Petrobras and HSBC MSCI EUROPE, you can compare the effects of market volatilities on Petroleo Brasileiro and HSBC MSCI and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Petroleo Brasileiro with a short position of HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and HSBC MSCI.

Diversification Opportunities for Petroleo Brasileiro and HSBC MSCI

0.4

Correlation Coefficient

Petroleo Brasileiro  HSBC MSCI

Very weak diversification

The 3 months correlation between Petroleo and HSBC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and HSBC MSCI EUROPE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI EUROPE and Petroleo Brasileiro is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Petroleo Brasileiro Petrobras are associated (or correlated) with HSBC MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI EUROPE has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and HSBC MSCI go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and HSBC MSCI

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the HSBC MSCI. In addition to that, Petroleo Brasileiro is 3.6 times more volatile than HSBC MSCI EUROPE. It trades about -0.24 of its total potential returns per unit of risk. HSBC MSCI EUROPE is currently generating about -0.11 per unit of volatility. If you would invest  1,741  in HSBC MSCI EUROPE on September 23, 2024 and sell it today you would lose (22.00) from holding HSBC MSCI EUROPE or give up 1.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  HSBC MSCI EUROPE

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

HSBC MSCI EUROPE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HSBC MSCI EUROPE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, HSBC MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Petroleo Brasileiro and HSBC MSCI

The main advantage of trading using opposite Petroleo Brasileiro and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, HSBC MSCI can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HSBC MSCI will offset losses from the drop in HSBC MSCI's long position.

The idea behind Petroleo Brasileiro Petrobras and HSBC MSCI EUROPE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.